Bligh seeks federal aid for $5bn toll

Queensland Premier
Anna Bligh
is putting pressure on the federal government to dramatically increase its contribution to the flood disaster funding, as the damage bill for the state escalates to more than $5 billion.

The federal government will have to contribute 75¢ in the dollar to the cost of rebuilding the state’s critical infrastructure and the general reconstruction, raising concern that this will put pressure on the Prime Minister's pledge to return the federal budget to surplus by 2012-13.

In Australia’s most widespread flood disaster since the 1950s, companies have started downgrading earnings forecasts in the mining, agriculture and construction sectors.

More than 40 communities and 200,000 people have now been affected, damage to roadways and bridges is estimated at up to $2 billion, and several major railways remain cut off, leaving well over $1 billion in lost mining and agriculture production.

Waters are only just peaking in flood-ravaged Rockhampton and more heavy rainfall is forecast for areas in the south-east of the state, where towns such as St George are anticipating more flooding from upstream.

“If you count in the cost to insurance and to families, the home rebuilding effort, the cost to public infrastructure and the economic loss, I think we are now well above $5 billion territory," Ms Bligh said after holding an emergency cabinet meeting yesterday. “I have made it equally clear to the Prime Minister that we need to be prepared at all levels of government for the fact that this disaster is unlike any other we have had to rebuild from, and that the normal disaster relief arrangements may not be enough."

The Bligh government is under intense political pressure, with record low approval ratings, as it nears the end of a privatisation campaign designed to regain its AAA credit rating, which it lost in 2009. The latest hit to the government’s revenue places further pressure on its budget deficit, which was forecast at $1.7 billion for fiscal 2011.

Shadow treasurer
Joe Hockey
took a swipe at the Gillard government’s ability to manage the flood crisis, saying yesterday that more money would have been available to help Queensland if less had been spent on the post- financial crisis stimulus package.

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“If the government wasn’t spending so much money it’s capacity would be even greater for helping Queensland,’’ he said. But he later acknowledged that Australia was “a rich enough country to be able to handle the worst’’ that Mother Nature could dish out.

Under the national disaster relief and recovery arrangements, the commonwealth will assume 75 per cent of the funding task after the cost of rebuilding reaches more than 1.75 per cent of the state government’s revenue.

“I have been talking to the Prime Minister about the size of the funding task here," Ms Bligh said, “but until the waters recede none of us knows what the price tag is, but we know it’s a large one."

She praised Prime Minister
Julia Gillard
’s efforts in initiating what funding she could to get the recovery under way. “It is precisely because of the Prime Minister’s interest here in Queensland that we have been able to expedite different levels of relief funding," Ms Bligh said.

While touring the flood-affected Lockyer Valley, Regional Development Minister
Simon Crean
insisted yesterday the federal government was speeding up relief and recovery efforts, bringing forward a further $77 million for damaged schools, hospitals and other key infrastructure in flood areas.

Mr Crean said the government was “responding quickly to the flood ­damage in Queensland and helping families, businesses, farmers and communities get back on their feet" with hundreds of millions of dollars already pledged.

So far the Premier’s Flood Relief Appeal has raised more than $12 million and Cricket Australia confirmed it would donate proceeds from the first one-day international cricket match this Sunday to the appeal.

Ms Bligh yesterday announced that Major General Mick Slater would head the flood recovery taskforce, while Queensland senator Joe Ludwig has been appointed by the Prime Minister to give additional assistance.

The Infrastructure Association of Queensland’s executive director, Paul Clauson, said the cost to repair roads, bridges and rail would easily run into a billion dollars and that every cent the government could get would be needed.

“The state government is confronted with a very serious financial situation which could well mean the federal government might have to step up to the plate in terms of funding the reconstruction," Mr Clauson said.

“When these floods subside we will see the true devastation and there will be big demand for construction teams and that means pressure on the labour force and machinery."

One of the key hits to state government revenue will be through lower mining royalties. Mining giants such
Rio Tinto
,
BHP Billiton
and Anglo American have shut down some operations in the state.

Macarthur Coal
advised yesterday that net profit would now be in the lower end of its guidance range as rain continued to hamper production. The company’s declaration of force majeure remains. Wesfarmers has also estimated that it will take until early February to restore normal operations at its Curragh North mine near Blackwater.

Engineering services company AJ Lucas also warned that its earnings would be hit. And JPMorgan downgraded its earnings estimates and share price targets for the world’s biggest mining contractor, Leighton Holdings, because of rain delays. The Royal Bank of Scotland downgraded building materials companies Boral and CSR as well.

Property Council of Australia’s Queensland executive director Kathy Mac Dermott said the flooding would have far-reaching repercussions for the development sector regarding values, settlement risk and funding.

“Immediate pain will be experienced by developers of subdivision projects and built form that are partially completed and have flooded," Ms McDermott said. “In some cases where projects themselves have not been flooded, construction has still been affected by heavy rain, with significant delays and increased costs experienced."

She said local councils would have to issue flood-affected notices on these assets, which could have serious consequences for future settlements.

Estimates on the overall damage to the country’s gross domestic product fall between 0.25 and 0.5 of a percentage point. National Australia Bank chief economist Rob Henderson said yesterday that NAB expected the floods to wipe 0.3 of a percentage point from GDP.

“The key ways in which the Queensland floods will affect the economy are through reduced output and higher inflation," he said. The higher inflation would stem from the scarcity of fresh food, since Queensland was an important producer of fresh produce for the rest of the nation.

Almost half the state’s 1.5 million-tonne grain crop has been destroyed. Trains are unable to deliver any supplies that are harvested and Graincorp recently said shipments had stopped and were unlikely to resume for another two weeks. Farmers are also struggling to get fresh fruit and vegetables to market.

Other soft commodities such as cotton have been wiped out stripping companies of expected earnings.

The Australian Agricultural Company said yesterday that it would lose up to $3.7 million worth of its cotton crop and has written off up to $5.5 million in infrastructure costs.

One of Queensland’s biggest insurers -
Suncorp
- has also stated the floods are a material event. RBS is estimating that if claims costs reach $100 million it would lower its fiscal 2011 earnings forecast for Suncorp by about 10 per cent.